Most Asia-Pacific markets have dropped sharply as expects warn that Kim's death could lead to civil unrest that could spark a crisis in the region. North Korea's military has been put on the highest state of alert. South Korea's Kospi index dropped 3.4% and Japan's Nikkei 225 fell 1.3% to 8,296.12. The Korean won fell 1.6% against the dollar. The FTSE 100 is expected to open down 69 points to 5,328.

Meanwhile Mario Draghi, president of the European Central Bank (ECB), has breached the taboo of not countenancing a break-up of the eurozone. In an interview with the FT Draghi warned that struggling eurozone countries that leave the euro bloc would still face great economic difficulties afterwards.Countries leaving the bloc and devaluing their currency would create "a big inflation" and still need to adhere to structural reforms, "but in a much weaker position," he said.

It is a shorters' market and not much real long-term investing. I think it is going to be a negative week with very thin volumes.

Everyone is talking about North Korea and the uncertainties, while Fitch had quite strong words in its statement. It does not look like anything is going to be solved in Europe until it is right on the brink.

The pan-European FTSEurofirst 300 index of top shares was down 0.4% at 952.96 points.

The banks are among the biggest losers in the FTSE 100 following Vince Cable's announcement that he would "adopt in full" Sir John Vickers' proposal to "ringfence" retail banking from riskier investment banks. Barclays dropped 1.9%, RBS is down 1.9%, Lloyds 1.8% and HSBC 1%.

9.41am: It's another busy day in the fight to save the euro, here are some of today's highlights.

14:30 GMT: European finance ministers will hold a conference call with an aim to agree a new €200bn loan to the International Monetary Fund as part of a deal to save the single currency. The EU still expects the UK to contribute £25.9bn to the fund.

14:30: The ECB will announce last week's bond purchases. It has spent €207.5bn on government bonds since its programme started in May last year.

15:30: George Osborne will address MPs on the Vickers' report into banking

9.25am: Standard & Poor's has said it won't downgrade South Korea's credit rating following the death of Kim Jong-il.

Our ratings on South Korea take into account temporary uncertainties associated with North Korean security risks as well contingent liabilities arising from a possible reunification of the North and South.

But it warned that South Korea's rating or outlook could be revised if the succession plan was not smoothly implemented or if there were other signs of political instability.

Earlier, Fitch Ratings said the death Kim Jong-il did not merit a negative move on South Korea's A+ rating.

9.38am: Christian Noyer, governing council member of the ECB, has told a press conference in Paris that the ECB will intervene to stem liquidity crises that affect European banks' stability, but ruled out large-scale sovereign bond buying.

Noyer, who is also governor of the Bank of France, said restoring market confidence in the eurozone would likely be a "difficult and potentially lengthy task".

Engaging in large-scale purchases of sovereign bonds is well beyond what should be expected in the central bank's role as a lender of last resort. The best possible contribution of the euro system is to ensure price stability in the medium run. To the extent that financial markets jeopardise price stability, the euro system must intervene. This analysis has motivated our decisions in the past and will continue to motivate them.

Large-scale asset purchases are not without risks. Although they may help to eliminate upward pressure on interest rates in the short term, they will also affect price and financial stability in the medium run. Such risks will not necessarily materialise, but when they do the repercussions are immense.

9.43am: Bank of England policymaker Paul Fisher (pictured) has said the present situation is potentially more dangerous than in 2008, and the downside risk from the eurozone crisis is bigger than inflation.

Korea: North Korean leader's death to temporarily unsettle South Korean assets. North Korean leader Kim Jong Il's death was confirmed today. In our view, the transition of power is already a completed affair, and we don't expect any disruption within North Korea. It is true that China has been uneasy on the inheritance of power for three generations in a row, but China has little choice as Kim Jong-un had been officially declared as the successor since late 2009 and has been appointed to the No.2 position in the party congress in October 2010. The question is if the new leader in North Korea feels compelled to demonstrate his new power. There is a possibility that Mr Kim Jong-un would cause an incident, similar to Yeonpyeong island incident in November 2010, to show off his resolve as a new leader. In order for North Korea to survive, brinkmanship is essential to coerce concession from the West. Kim Jong-un also may want to cause an incident so that China would be inclined to admit him as the leader of North Korea. How China reports the transition and whether it would formally endorse the new leader's legitimacy is a key factor to watch in the next few hours. While we think the transition of power is a relatively smooth process, financial markets are likely to remain concerned for the next few weeks. KRW underperformed Asian currencies today on the back of the news and could be hit further in the coming days until uncertainty fades.

Homeowners in some of the nation's poorest areas have put themselves at increased risk of mortgage arrears or repossession as a result of the sharp rate at which they withdrew equity from their homes in the run-up to the credit crunch in 2007.

Based on data obtained under a freedom of information request from the Financial Services Authority, the FT analysis shows that nationwide, 61% of those remortgaging their properties in 2007 used the opportunity to take equity out of their homes. But in some areas, the percentage was much higher, with 74% of those in Northern Ireland pulling out equity and 68% in Bradford while 67% and 64% respectively of those remortgaging in the Doncaster and Oldham postal codes did so. The last two areas are in the two lowest deciles for income and wellbeing as measured by the Index of Multiple Deprivation.

Furthermore, in those areas price falls since the peak of the market in September 2007 have been larger than those in England and Wales generally and have been much slower to recover. Remortgagers in those areas who extracted large amounts of capital may well owe more on their homes than the market value even though they were purchased well before property prices peaked.

10.51am: Italian president Giorgio Napolitano says the firewall to defend the euro is still insufficient. Details from Reuters

Speaking at a ceremony in Rome, Napolitano said medium-term measures to toughen fiscal discpline taken by European leaders this month must be accompanied by "the immediate defence of financial stability in the eurozone".He called for a "strengthening of the still insufficient firewalls necessary to defend sovereign debt and save the single currency".

On Sunday Italy's deputy economy minister Vittorio Grilli also said European debt bailout mechanisms needed to be reinforced.

11.14am: The Bundesbank is confident that the German economy, Europe's largest, will escape a major contraction in the months ahead. Many economists expect at least one quarter of contraction but some sectors have been surprisingly resilient.

Germany's central bank, which recently slashed its 2012 growth forecast to 0.6% from 1.8% six months ago, said in its monthly report:

The construction sector has still turned out to be very robust. The same is true for private consumption, which has been supported by the continued favourable situation in the labour market.

Seasonally adjusted, industrial orders in October more than compensated for the strong loss they saw a month earlier, which along with the slight improvement in confidence in industry in November suggests that the dip in the economy in the autumn should not turn out too deep.

Industrial production beat forecasts to rise 0.8% in October, bouncing back after a steep fall in September.

11.21am: China has offered its condolences to North Korea and described Kim Jong-il as a "great leader" and "close friend". In a statement read out on the main TV evening news, the Chinese government said it was confident that co-operation with North Korea would continue under its new leader Kim Jong-un.

Meanwhile, South Korean media reported that North Korea test-fired a short-range missile on its eastern coast today.

11.42am: Over in Ireland, the central bank has slapped its largest ever fine of €3.35m on an insurance company for breaching consumer and insurance regulations.

The central bank was criticised for its lax regulation during the recent property boom. Its director of enforcement, Peter Oakes, said:

This is the largest fine issued by the central bank and reflects the seriousness with which we view fundamental regulatory failures including indadequate systems and controls. This enforcement action relates to consumer protection failures and the penalty imposed demonstrates that we will not tolerate breaches of this nature.

11.49am: Time for a look at the markets. The FTSE is still in the red, down less than 3 points at 5384. The Dax in Frankfurt is up more than 40 points while the CAC in Paris has climbed nearly 15 points.

On currency markets, the euro is trading at $1.30, near an 11-month low of $1.2945 hit last week, while news of North Korean leader Kim Jong-il's death pushed the dollar higher, regarded as a safe-haven investment.

11.55am: Spain's new prime minister Mariano Rajoy is unveiling a wide range of urgent reforms to the economy and the budget. The only item of public spending that will increase in January is pensions - everything else will be cut.

Among the reforms will be a move of public holidays to the closest Monday or Friday. The Spanish business association CEOE (Confederación Española de Organizaciones Empresariales), had lobbied for this to discourage workers from taking a 'bridging' day. At the moment, when public holidays fall on a Tuesday or Thursday many people take the days off in between the holiday and the weekend - and the economy effectively comes to a standstill.That brings back memories of holiday clever engineering around the Royal Wedding and Easter that allowed you to head away for two weeks while taking only three days holiday.

12.41pm: More from Rajoy's speech to parliament. He said he is aiming to reduce Spain's deficit by €16.5bn next year, but he was very sketchy on the detail. The aim is still to bring the deficit as a percentage of GDP down to 4.4% by 2012. It was 9.2% last year.

He said Spain's scary jobless rate had risen to about 23%, and 45% of those under 25 are unemployed. "The panorama could not be more somber," he said.

Photograph: Jasper Juinen/Getty Images

He also pledged to cut taxes and increase pension payments, but was skimpy on the details of how he's actually going to pay for it.

A budget will submitted to parliament by the end of the year.

1.11pm: Raoul Ruparel, Open Europe's head of economic research, says the ECB's exposure to struggling eurozone economies has surged by 50% in six months. Which means there's no chance it can afford to act as the lender of last resort.

The latest EU summit has reached an outcome that seems to have fallen short of encouraging the greater ECB intervention which markets were hoping for. Ultimately, the new fiscal constraints and budget rules lack teeth and therefore credibility. The key concerns surrounding the ECB lending to states, such as whether sufficient conditionality is in place and the risk of countries becoming dependent on such funding, remain unresolved.Lower ECB interest rates and more liquidity to banks may be welcome in the short-term since this could help stave off another credit crunch. However, hopes, and plans, that this funding will lead to a boost in purchases of sovereign debt look misguided. It would be a spectacular own goal for the eurozone if banks waste the opportunity to clean up their balance sheets by loading up on risky sovereign debt, just to keep the eurozone ticking over in the short term.The ECB's exposure to the PIIGS now tops €705bn, and has increased by over 50% in the past six months, highlighting how risk continues to be transferred from banks and investors to taxpayer-backed institutions. But instead of utilising the time the ECB has bought them to come up with a sensible plan, eurozone leaders have continued their bickering.

1.23pm: It looks like the IMF-organised €200bn eurozone bailout might be off. Italian eurozoen reporter Fabrizio Goria tweets: "Well, bye bye IMF to help Europe. So long and thanks for all the fish."

Eastern European countries may need to tap existing international support packages or request more aid from the International Monetary Fund should capital outflows from western banks in the region deepen.Countries with no assistance currently in place should negotiate international aid packages to "boost confidence enough to ensure that the bear case does not materialize," economists Pasquale Diana and Jaroslaw Strzalkowski at Morgan Stanley in London wrote in an e-mailed report today.Eastern Europe, where western European banks control about 80 percent of the banking industry, risks a financing gap as parent banks are being squeezed by deteriorating loan quality and slowing economic growth. Capital outflows would exacerbate the region's credit crunch and hurt domestic demand. Western banks lent 139 billion euros ($181 billion) to eastern Europe, Morgan Stanley estimates."We look at deleveraging pressures and find that aggressive retrenching, not our base case, by western European banks could leave a funding gap in central and eastern Europe such that most countries except the Czech Republic would probably need to tap existing support packages or negotiate more assistance with the IMF and the European Union," the report said.Hungary may need around 12 billion euros in IMF aid "to restore confidence," it said. Romania's precautionary credit line of 5.4 billion euros with international lenders "may not be enough under a severe" deleveraging scenario."We continue to think there is no case for a 'big bang' withdrawal from the region," the report said. "For the banks in particular, we think that the IMF, EC involvement in any given country in central eastern Europe would be particularly encouraging."

2.21pm: William Hague, the foreign secretary, is holding a press conference now with his German opposite number, Guido Westerwelle.

Westerwelle says Germany and the UK will stand "shoulder-to-shoulder" to save the Euro. He said the UK is an "indispensable" partner in the European Union.

Photograph: Koca Sulejmanovic/EPA

He said Europe has "no hidden agenda" against the City. "It is in our mutual interest to have a strong City of London."

2.38pm: Wall Street has opened. All three manin indices are up a fraction. The Dow's up 0.25% to 11,895 points. The Nasdaq is up a fraction (0.4%) to 2,564. The S&P 500 is up 0.2% to 1,222. In London the FTSE 100 is virtually flat on the day at 5,385 points.

And with that, I'm handing over to my colleague Graeme Wearden....

3.02pm: Afternoon all. Anytime now, finance ministers from across the Eurozone should be picking up the telephone to hold a conference call to discuss the decisions taken at the summit of 8-9 December.

Alas we can't dial into the call, but we'll be watching out for details (these things usually leak pretty quickly).

3.06pm: The press conference between the UK and German foreign ministers ended a few minutes ago. As Rupert a little blogged earlier, Guido Westerwelle went to some lengths to insist that relations between the two countries are still strong despite Britain's recent veto.

I would like to tell you there is no hidden agenda against the City of London. We think it is in our common interest, in our mutual interest, to have a strong segment of financial services here in the City of London. If you go into details, and see how many German, French, Spanish, Italian banks are invested here in the City of London, then I think you will see that it's obvious that we share this goal.

And:

For Germany, the United Kingdom is an indispendable partner in the European Union and there is no doubt for us we want to make the next steps in the European Union together, as 27, or with Croatia as 28 countries. We think we have a common destiny. We think the European Union is not only the answer to the darkest chapter in our own history. It is also a life insurance in times of globalisation because no country - not Germany, not Great Britain, not France - is strong and big enough to face the challenges of globalisation on its own ... My main message is for the British people - you can count on us, and we count on you.

3.12pm: The most dramatic part of William Hague and Guido Westerwelle's press conference was when Germany's foreign minister spoke about his country's commitment to Europe following the second world war.

Westerwelle told an anecdote about how he went on a camping holiday overseas [to Brittany] in the 1970s as a teenager, and was shocked that the appearance of a "blonde, slim" young German reduced one woman to tears.

That, and a trip to Berlin after the Wall went up, made him realise the importance of a united Europe.

German reunification was also the reunification of Europe. For us, Europe is not only our destiny, it is also our desire.

3.35pm: Mario Draghi, the head of the European Central Bank, has begun testifying to the European Parliament.

3.44pm: Mario Draghi told the European Parliament that he welcomed the decisions taken at the EC Summit earlier this month. The ECB president told MPs that EU leaders had:

...really brought about a breakthrough in terms of a commitment to sound and transparent fiscal rules.

Draghi added that the 'fiscal compact' was an essential step in the 'evolution' of the eurozone.

Otherwise, Draghi's statement to the European Parliament didn't include many fireworks. He emphasises that the ECB was already takings several steps to ease market tensions and encourage banks to keep lending to the real economy.

4.00pm: The first MEP to question Mario Draghi this afternoon asked the ECB president to comment on today's front-page story in the Financial Times -- headlined "Draghi warns on break-up" -- in which he is quoted warning of the dangers of a costly eurozone break-up.

Draghi replied that the creation of the eurozone was irreversable. Here's the key quote:

I have no doubt whatever about the strength of the euro, its permanence and its irreversibility.

Reading the FT interview closely, it appears that Draghi simply accepted that a break-up was possible. Here's the key exchange (from the FT's transcript).

FT: But these austerity programmes are very harsh. Don't think that some countries are really in effect in a debtor's prison?

Draghi: Do you see any alternative?

FT: They could leave the eurozone?

Draghi: But as I said before, this wouldn't help. Leaving the euro area, devaluing your currency, you create a big inflation, and at the end of that road, the country would have to undertake the same reforms that were due to begin with, but in a much weaker position.

So,. Draghi was warning that a eurozone break-up is on no-one's interests, not that it's about to happen. Made a good headline, though.....

4.13pm:Mario Draghi has warned that Europe cannot avoid austerity as it attempts to fix the eurozone crisis.

The ECB head said there was no trade-off between austerity and growth, explaining that it was impossible to avoid a short-term contraction as the previous growth levels in some countries were not sustainable.

Draghi appears pretty relaxed, despite the high-octane start to his career at the ECB (in little more than a month he has cut eurozone interest rates twice, and bought tens of billions of euros of Italian and Spanish debt).

Draghi also ruled out the idea that the ECB should embark on a much larger bond-buying programme. The resulting loss of credibility, he said, could be disastrous.

Losing credibility, especially for your central bank, I don't think it is going to do any good for market confidence or euro area design.

My colleague David Gow suggests that Draghi has "obviously read" Jurgen Stark's interview in Wirtschaftswoche, in which the departing ECB chief economist reveals that he resigned partly due to his opposition to the ECB's existing bond-buying programme.

Draghi's key statement so far came when he said: "The ECB cares about financial stability, it cares a lot, but it has be done without weakening the credibility of the institution". This came immediately after saying "we're trying to avoid a credit crunch which might come from lack of funding (for banks)"...

Critics of the European Central Bank say that, if it cares about financial stability and not just price stability in the medium term ("inflation close to but under 2%), it should embark on unlimited bond-buying, QE and eurobonds.

4.42pm: The word from Westminster and Brussels this evening is that Britain is unlikely to contribute £25bn to an enlarged IMF rescue fund for Europe. Here's why:

The UK currently has around £38.7bn set aside to meet her international commitments through the IMF. Nealy £30bn of these funds are already allocated to various existing programmes, so there is just £9bn left in the pot.

As David Gow puts it: "No wonder expectations are being dampened down...."

5.05pm:Britain has officially confirmed that it will not contribute more funds to the International Monetary Fund to help fight the eurozone's debt crisis.

George Osborne told his EU counterparts this afternoon that the UK would not provide the £25bn loan -- part of a €200bn package from Europe to the International Monetary Fund. The decision was announced during a conference call of European finance ministers.

Sources at the UK Treasury say that Osborne made it clear that the UK would not provide extra funding. They also point out that the government has been open for several days that it would not give the Eurozone more financial support (see previous post for more details).

The point of the conference call was for finance ministers to agree the details of the new €200bn loan. The idea was that Europe would loan this money to the IMF, which would then used it to support the weakest eurozone nations. It is now unclear how that €200bn package can go ahead in full.

One government insider has told Reuters that there was "no agreement" on the €200bn fund.

The original plan was for eurozone members to contribute €150bn, with €50bn (£42bn) coming from other members of EU. Britain is much the largest economy of this latter group, so was lined up to pay more than half.

5.28pm: Britain's decision not to contribute to the €200bn IMF-EU rescue fund had been well-flagged in recent days. Government officials had explained that the UK would not lend more funds to support the single currency until the eurozone had created a larger "firewall" to prevent the crisis escalating.

Osborne didn't draw up the drawbridge completely -- he did tell other EU finance ministers that the UK was still prepared to take part in other "global efforts" to increase the IMF's resources.

5.45pm: Without £25bn from the UK, it appears impossible tonight that the IMF-EU rescue fund could reach its €200bn target.

It does appear that Eurozone countries are prepared to contribute their slice, worth €150bn. Britain, though, isn't the only non-eurozone member of the European Union to have misgivings about the deal.

In the Czech Republic, there is considerable opposition to the plan (as the FT points out today, its €3.5bn contribution is equal to more than 10% of its foreign currency reserves).

In fact, Denmark appears to be the only country that has said it will definitely stump up -- it is expected to lend €5.4bn.

6.01pm: The Press Association is reporting that the UK has effectively sunk the €200bn EU-IMF package, by refusing to contribute "its" £25bn portion of the loan.

From PA:

It is understood that Mr Osborne has secured the removal of the 200 billion euro (£168 billion) figure from the final communique to be released following today's conference call, though the text may mention the 150 billion (£126 billion) to be supplied by eurozone members.

It appears that the next step will come in January when G20 leaders meet in Mexico. That gathering could be the scene for fresh discussions about a rescue package.

Dutch Finance Minister Jan Kees de Jager told Dutch television this evening that George Osborne had cited this G20 meeting, explaining that:

Britain said it wanted to talk about in a G20 context.

The G20 consists of the world's largest developed and developing economy, and could potentially agree to a general increase in IMF resources.

6.35pm: Brussels sources are now briefing that the eurozone has agreed to lend the International Monetary Fund €150bn to use to fund rescue programmes within the eurozone.

So, the plan to persuade EU members from outside the eurozone to contribute €50bn is off the table. Britain's refusal to lend £25bn will dominate the headlines, but it is clear that other countries have been coy about making their own contributions.

The news that the funds for a new IMF packages for the eurozone will be funded solely by, er, members of the eurozone (many of whom face serious debt problems) is not ideal.

As economist Dr Constantin Gurdgiev put it on Twitter:@GTCost So EU will borrow funds 2 lend 2 IMF so it can borrow them back from IMF... yes, THAT is pure madness

6.55pm: The sudden shrinking of the IMF-EU rescue fund comes as policymakers brace themselves for further turmoil.

Mario Draghi, head of the European Central Bank, warned the European Parliament this afternoon that the banking sector will find it hard to access affordable funding in early 2012, annd possibly throughout next year.

Draghi told MEPs that this is why the ECB has been providing more liquidity to banks, as it:

wants to avoid a further slowdown in economic growth and a possible recession.

A statement issued by Brussels this evening went on to say that Britain will define its own contribution to the IMF "early in 2012", within the framework of the G20. That squares with the earlier comments from the Dutch finance minister (see 6.17pm).

The Czech Republic, Denmark, Poland and Sweden will also provide loans to the IMF, according to the EU.

The news has pushed the euro back down to the $1.30 mark against the dollar, and send shares falling in Wall Street - where the Dow Jones industrial average is now down 104 points at 11,762.

8.19pm: If you're confused by the concept that the eurozone will lend €150bn to the International Monetary Fund, so that the IMF can help bailout the eurozone, Paul Donovan of UBS has a handy explanation:

He told the Jeff Randall Live show this evening that:

It's like a warm-wash laundry cycle.

Reassuring, no?

The reason Europe needs to fire billions of eurozone across the Atlantic on a piece of elastic is that European law frowns on explicit bailouts. Lending the money to the IMF so that the IMF can lend it back, though, appears to be a handy loophole.

As Donovan put it, "it's not breaking the law", more like "cleverly" bending it.

8.45pm: Further evidence that this €150bn eurozone loan to the IMF is a little odd: Italy (too big to fail/bail) is providing €23bn.

Sony Kapoor of Re-Define, a London-based thinktank, has a similar take:

@SonyKapoor The #EFSF may have to lend money to #Italy so it can give money to the #IMF which in turn will give money 2 #EFSF & to #Italy

9.12pm: The news that another European rescue plan has come (slightly) unstuck sent shares falling in New York. The Dow Jones industrial average just closed with a 100-point fall, down 0.84% to 11,766.

Wall Street traders were also disappointed that ECB head Mario Draghi hadn't indicated that he was itching to take more dramatic steps to calm the crisis, during his appearance at the European Parliament. Instead, as we blogged earlier, Draghi warned that the ECB's reputation would be critically damaged by such a move.

The comments "put more nails in the proverbial coffin of having the European Central Bank step in as the lender of last resort," Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Marketwatch.

9.26pm: Here's the full statement issued by the European Union this evening. Interestingly, it flags up that some of the countries supporting the €150bn package will need to seek parliamentary approval:

EU Member States support a substantial increase in the IMF's resources. These resources will enhance the IMF's capacity to fulfill its systemic responsibilities in support of its global membership, which is especially important given the ongoing economic slowdown and financial market tensions. The IMF's involvement will be based on normal IMF conditionality.

The EU, and in particular Euro area Member States are fully aware of their special responsibility in the current circumstances. Therefore, on 9 December, euro area Member States have committed to enhanced governance to foster fiscal discipline and deeper integration in the internal market as well as stronger growth, enhanced competitiveness and social cohesion.

Ministers confirmed today that, as part of a broader international effort to improve the adequacy of IMF resources, euro area Member States will provide €150bn of additional resources through bilateral loans to the Fund's General Resources Account.

Burden-sharing among euro area Member States will be based on quota shares resulting from the 2010 quota reform.

The Czech Republic, Denmark, Poland, and Sweden indicated their willingness to take part in the process of reinforcing IMF resources. The United Kingdom has indicated that it will define its contribution early in the new year in the framework of the G20.

For some Member States, commitments will be subject to parliamentary approval.

The EU will also work expeditiously to implement in full the 2010 quota and governance reform of the IMF.

The EU would welcome G20 members and other financially strong IMF members to support the efforts to safeguard global financial stability by contributing to the increase in IMF resources so as to fill global financing gaps.

9.47pm: Some late news out of Paris -- the French prime minister has declared that relations between France and the UK have been patched up again after last week's war of words.

François Fillon, who felt both barrels of Nick Clegg's wrath last Friday, told reporters that the disagreement has been "smoothed over".

François Fillon. Photograph: Nelson Almeida/AFP/Getty Images

Fillon explained that his negative comments about the UK's economic growth and deficit levels had not been an attack on the govermment's policies. Instead, he said: (via Reuters):

I simply wanted to emphasise that the way in which the credit agencies and the markets judge the situation of eurozone countries is more linked to the eurozone's governance and difficulties of the eurozone in reacting to the crisis because of its political organisation, [rather] than to the level of debt and deficits.

So not exactly an apology, but certainly an indication that Fillon got Clegg's instruction to cool things down.

France remains a AAA-rated nation tonight, although there is still speculation that Standard & Poor's might still hit the country with a downgrade before the end of the year (Merry Christmas!).

The French establishment, though, continues to insist that a downgrade would be unfair. Henri Guaino, a special adviser to French President Nicolas Sarkozy, has apparently told business daily Les Echos that cutting France's triple-A rating would be "completely unjustified".

The interview is due to be published tomorrow. According to Dow Jones, Guaino says that:

There's no risk that France could default on its debt....As opposed to countries like Greece and Italy, the State is strong, taxes are paid, and the Government shows determination in cleaning up its finances. The only risk is to become the target of speculation.

Not quite sure the Italians will appreciate Guaino's comments....

10.22pm: And some late news out of Lisbon too. The IMF has warned the Portuguese government that it is "critical" that structural economic reforms are implemented swiftly, given the "weakening global conditions'.

The IMF also advised that Portugal's government may need to help fund the recapitalisation of the country's banks.

The warnings came as the IMF approved the latest tranche of Portugal's bailout, worth €2.9bn.

• Britain has refused to support a loan from the European Union to the International Monetary Fund, to fund eurozone rescue efforts. George Osborne told EU finance ministers that the UK would not contribute £25bn. With other EU countries hanging back, the €200bn package has shrunk to €150bn

• Germany made an attempt to rebuild relations with the UK. Foreign minister Guido Westerwelle promised that there was no "hidden agenda" to harm the City of London.

• Mario Draghi has warned that the European crisis could escalate in 2012. The head of the ECB also insisted that he had "no doubt whatever" about the future of the eurozone.

• Spain unveiled new austerity plans. Prime minister Mariano Rajoy is aiming to save €16.5bn in 2012 through a range of spending cuts and economic reforms, although details remain sketchy.

Thanks for reading, and for the great comments (there's a fine debate raging down below). We'll be back tomorrow, until then good night!

About this article

Eurozone crisis live: UK refuses to contribute to €200bn IMF package

This article was published on
the Guardian website
at 18.16 EST on Monday 19 December 2011.
It was last modified at 16.20 EDT on Tuesday 20 May 2014.
It was first published at 02.51 EST on Monday 19 December 2011.